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Demand continues to outpace supply as home prices rise

Ryan Berlin: January marked the seventh straight month of increased sales from the year before.

The calendar may now read 2020, but the supply and demand dynamics that were established in the second half of 2019 have clearly carried over into January. In the most recent month, sales were up 35% on a year-over-year basis, making it seven straight months of sales rising versus the previous year.

Conversely, January’s inventory was down by 24% compared to the same time last year, marking four straight months of year-over-year contractions. Anecdotal evidence, particularly for resale condos, suggests that the prevalence of multiple-offer scenarios, subject-free offers, and offers above sellers’ asking prices are on the rise, and this is beginning to create tailwinds for prices.

More specifically, for the first time since December 2018, the year-over-year change in the region’s benchmark condo price was positive in January 2020 (up by 0.9% vs January 2019). A similar trend is characterizing the detached and townhome segments.

Underpinning the market’s latest trajectory are good, if not great, economic and demographic fundamentals. On the population front, the latest data for British Columbia shows that province added more people (approximately 34,000) in the most recent three months than in any quarter dating back to 1971, when data were first collected.

This continues to drive the demand for housing, along with a tight labour market in Metro Vancouver: the region’s latest unemployment rate, at 4.5%, is the lowest among larger metros in Canada, indicating that those who are looking for work are finding it.

Both short-term and and longer-term interest rates remain historically low, with global economic uncertainty putting additional downward pressure on rates.

Together, these features of our market landscape point to continued growth in demand generally, and resale counts more specifically. The evidence suggests that first-time home buyers and previously-sidelined buyers are (re-)entering the fray and, as a result, the spring market is shaping up to be a very active one.

The longer-term trajectory for the market also remains positive thanks to the region’s growing population and workforce.

Ryan Berlin is the Senior Economist with rennie intelligence.